The long-awaited Spring Budget was announced yesterday and there were no real surprises – mainly thanks to the very leaky Downing Street rumour mill! The Chancellor confirmed further Covid related support and, well…not much else really. He did, however, announce a variety of tax consultations to be revealed, which are expected to pave the way for some future tax changes to try and balance the books. We’ll keep you posted as and when we know more.
But for now, not much has changed. There are some aspects though that you should be aware of and I have summarised them here.
- Income Tax rates remain unchanged
- The Personal Allowance (the amount you can earn before you pay any tax) will rise to £12,750 as planned in April 2021 and will then be frozen until April 2026
- The basic and higher rate bands will rise as planned from April 2021 and will then be frozen until April 2026
- So anyone with their full Personal Allowance won’t start paying higher rate tax until earnings exceed £50,270
- The starting rate for savings tax band remains at £5,000
Capital Gains Tax
- There was talk of a change here but for now, the annual exempt amount of £12,300 person remains unchanged and frozen until April 2026
- The rates of tax have also been frozen until 2026
- Again no changes here and the rates are frozen until April 2026
- The nil rate band (the amount of the Estate not liable to IHT) remains at £325,000 per person and the Residence Nil Rate Band (RNRB) continues at £175,000 per person
- No change to the RNRB taper for Estates valued at over £2 million
- No changes to tax relief now but it’s very likely to be one of those opportunities that could be radically changed following the consultations, and so all the more reason to keep funding your pension and taking advantage of the tax relief while you can
- One immediate change is regarding the Lifetime Allowance (LTA) which is currently £1,073,100. Pension benefits above this level are subject to a Lifetime Allowance Charge at various points. This can be 25% if taken as income, or 55% if taken as lump sum
- The LTA was due to increase, however, it has been frozen at the current rate
- But it’s important to remember that the LTA isn’t a ceiling on what can be saved into pensions. There are many good reasons for those potentially impacted to continue saving into a pension, especially if stopping funding means losing out on contributions from your employer
- This remains at 19% for business with profits under £50,000
- The rate increases to 25% for businesses with profits in excess of £250,000 and there is relief for business caught in the middle, so they won’t necessarily pay the full 25% rate
- The temporary increase in the Stamp Duty nil rate band has been extended to 30th June 2021 and stands at £500,000
- This will reduce to £250,000 from 1st July and then return to £125,000 in October this year
Mortgage Guarantee Scheme
- This could be useful for our younger friends and aims to get prospective buyers onto the property ladder with a deposit of just 5%
- It’s available on properties valued up to £600,000 and the government will offer lenders the guarantee they require to provide a mortgage covering the remaining 95%
- A lot of mainstream lenders have already signed on to this
- If you need any mortgage help, please do let us know and we will put you in touch with our colleagues at First Financial who will be able to help
So whilst no big changes immediately, there will be changes afoot that are likely to require some thought and planning and we look forward to the challenge!
If there is anything here you need further clarity on, please do not hesitate to get in touch with us.